Calculation Methodology

Why we publish this

Every projection in ClearDebt — months to payoff, total interest, strategy comparison — is a deterministic calculation. Anyone with a spreadsheet should be able to reproduce it. This page documents the formulas, the assumptions, and the things we deliberately do not model so you can decide whether the projection is useful for your situation.

Inputs we use

• Current balance — the principal owed today.
• APR — the annualized interest rate stated on the account.
• Minimum payment — what the issuer requires each month.
• Monthly budget — the total dollars per month you commit across all debts.
• Strategy — Avalanche (highest APR first), Snowball (smallest balance first), or Custom (you set the order).

Monthly interest formula

For each account, each month we accrue interest using the standard simple-monthly approximation:

interest_this_month = current_balance × (APR / 12)
new_balance        = current_balance + interest_this_month − payment_this_month

This matches how most U.S. credit-card issuers compute periodic finance charges on a monthly statement cycle. We do not model daily compounding — for typical APRs and balances the difference over the full payoff is under one percent and the simpler model is easier to audit.

Strategy ordering

• Avalanche — every account first receives its minimum payment. Any leftover budget goes entirely to the account with the highest APR until that balance is cleared, then rolls to the next-highest APR.
• Snowball — every account first receives its minimum payment. Any leftover budget goes entirely to the account with the smallest current balance until it is cleared, then rolls to the next-smallest.
• Custom — you set the priority order; the same minimum-then-extra logic applies.

What we hold fixed

Projections assume a steady state. We do not model:

• APR changes (promo expirations, variable-rate adjustments).
• New charges added to the balance after the first month.
• Late fees, returned-payment fees, or over-limit fees.
• Cash-advance APRs or separate balance buckets within one card.
• Tax effects (e.g., student-loan interest deductions).

These omissions are deliberate. Modeling them requires guessing your future behavior, and the projection becomes less auditable. If any of them apply meaningfully to your situation, the projection is a lower bound on time and interest, not a forecast.

Convergence indicator

When the total interest difference between Avalanche and Snowball is less than 1% of the smaller number, the dashboard shows a convergence note. In that case the two strategies effectively cost the same and the choice should be driven by motivation, not math.

Reproducing a projection

Open a spreadsheet, list each debt with balance / APR / minimum payment, apply the monthly formula above row-by-row for each account, and route any leftover budget per the strategy rules. Your numbers will match ClearDebt to within cents-of-rounding for the same inputs.

Want to see this applied to a worked example? Read The 30-Minute Debt Payoff Plan.